Correlation Between Jeil Steel and Hanil Chemical

Can any of the company-specific risk be diversified away by investing in both Jeil Steel and Hanil Chemical at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Jeil Steel and Hanil Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jeil Steel Mfg and Hanil Chemical Ind, you can compare the effects of market volatilities on Jeil Steel and Hanil Chemical and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Jeil Steel with a short position of Hanil Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeil Steel and Hanil Chemical.

Diversification Opportunities for Jeil Steel and Hanil Chemical

-0.55

Correlation Coefficient

Jeil Steel  Hanil Chemical

Excellent diversification

The 3 months correlation between Jeil and Hanil is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Jeil Steel Mfg and Hanil Chemical Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Chemical Ind and Jeil Steel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Jeil Steel Mfg are associated (or correlated) with Hanil Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Chemical Ind has no effect on the direction of Jeil Steel i.e., Jeil Steel and Hanil Chemical go up and down completely randomly.

Pair Corralation between Jeil Steel and Hanil Chemical

Assuming the 90 days trading horizon Jeil Steel Mfg is expected to generate 2.58 times more return on investment than Hanil Chemical. However, Jeil Steel is 2.58 times more volatile than Hanil Chemical Ind. It trades about 0.03 of its potential returns per unit of risk. Hanil Chemical Ind is currently generating about -0.08 per unit of risk. If you would invest  155,800  in Jeil Steel Mfg on September 14, 2024 and sell it today you would earn a total of  19,100  from holding Jeil Steel Mfg or generate 12.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.62%
Values	Daily Returns

Jeil Steel Mfg  vs.  Hanil Chemical Ind

Jeil Steel Mfg

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jeil Steel Mfg are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeil Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Hanil Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanil Chemical Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanil Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jeil Steel and Hanil Chemical

The main advantage of trading using opposite Jeil Steel and Hanil Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeil Steel position performs unexpectedly, Hanil Chemical can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hanil Chemical will offset losses from the drop in Hanil Chemical's long position.

The idea behind Jeil Steel Mfg and Hanil Chemical Ind pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.